European gas prices fell sharply yesterday as tensions on the Ukrainian border eased.
Indeed, Russian troops have been pulled back from the Ukraine border, and after having met German Chancellor Olaf Scholz in Moscow President Putin said he did not want a war with Europe.
The rise in Russian flows (averaging 212 mm cm/day yesterday, compared to 203 mm cm/day on Monday, thanks to the increase in flows through Ukraine) provided additional downward pressure. The drop in Asia JKM prices (-5.67% on the spot, to €76.160/MWh; -14.52% for the April 2022 contract, to €68.883/MWh) helped accompany the downtrend.
At the close, NBP ICE March 2022 prices dropped by 22.130 p/th day-on-day (-11.47%), to 170.890 p/th. TTF ICE March 2022 prices were down by €9.85 (-12.20%), closing at €70.919/MWh. On the far curve, TTF ICE Cal 2023 prices were down by €3.94 (-7.05%), closing at €51.870/MWh.
Our rather bullish outlook on TTF ICE March 2022 prices was totally invalided yesterday, with prices dropping towards the 5-day Low and 20-day Low targets. Prices are down again this morning, trading close to the 20-day Low target (€66.30/MWh). This level should lend them support, particularly as the latest weather forecasts are pointing to colder weather by the end of February in Northwest Europe.
Overall, we think the European gas balance is not yet comfortable enough (despite the recent improvement, European gas stock levels remain historically low) for TTF 1st nearby prices to drop right now towards the average coal parity level for power generation (currently at €52/MWh), breaking at the same time the support of the 1-year average (€57/MWh).